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Interest Only mortgages

Is an Interest Only mortgage the right option for you? We’re here to help you decide. 

Young woman holding a tea cup, in a coffee shop

How does an Interest Only mortgage work? 

With an Interest Only mortgage, your monthly payments just cover the interest on the money you've borrowed. You don’t have to pay anything off the actual loan until your mortgage term ends. 

This means your monthly payments will be cheaper than other repayment options. But over time, your mortgage loan won’t go down. You’ll still have the full balance to pay at the end of your mortgage term, and any charges added on. So, it’s vital that you have a suitable repayment plan in place.

Is an Interest Only mortgage right for me?  

To help you decide, here are some key things to consider when it comes to having an Interest Only mortgage.

ProsCons
Cheaper monthly payments compared to other repayment options.At the end of your mortgage term, you’ll still have to pay your outstanding loan (plus any charges added on).
The money you save could go to other financial priorities – like investments or another property. You’ll need to regularly review your repayment plan, to make sure you can pay off your outstanding loan when the mortgage ends.
 Future changes could impact your ability to repay your mortgage loan.
 More interest will be paid over your term compared to a repayment option. 

Can I get an Interest Only mortgage? 

One of our Interest Only mortgages could be for you if:  

  • You can put down a deposit of at least 30% towards a property.  
  • You’re happy with a maximum mortgage term of 25 years.  
  • You’re able to repay the full original loan amount and charges either before or at the end of your mortgage term.  
  • You can provide evidence to support your repayment plan during the application process and throughout the mortgage term.  
  • You’re not a first-time buyer. 
  • You have an income of at least £40,000 a year if you’re applying for an Interest Only mortgage on your own. For a joint application, the minimum annual income is £60,000.

You could lose your home if you don't keep up with your mortgage repayments and/or repay your balance and any charges at the end of your term.

Interest Only / Repayment comparison calculator 

Input your mortgage details below and click the calculate button. Then move the slider to see how your payments would change if the Interest Only amount was increased or reduced.

£
£
%
years

Move the slider to see how your payments would change.
So we can show a full % on repayment or interest only, the amount entered in 'Interest Only amount' may increase

Your approximate monthly payment would be:
£349

The calculator above will help you to compare the cost of your mortgage on repayment or interest only methods or a combination of the two - part and part. This may help you to understand if your repayment strategy will be sufficient to repay the remaining balance off at the end of the mortgage term. 

Important Information

Remember that – in addition to the approximate payment shown in the calculator above – you will have to repay the remaining balance off at the end of the mortgage term for any part of the mortgage on an Interest Only method. You need to ensure your repayment strategy for this part of the loan is adequate.

This information provides an approximate indication of costs. It does not contain all the details you need to choose or vary a mortgage. Please make sure you read the separate Mortgage Illustration (MIL) or mortgage offer before you make a decision.

We’ll provide you with full details when you apply for any of the above options.

Thinking of applying for an Interest Only mortgage?

Check out our Interest Only mortgage products 

Not all lenders offer Interest Only mortgages – but the great news is that we do. 

Use our Mortgage Product Finder to check out our Interest Only products. We also offer repayment and part and part options (where the mortgage is part repayment, part Interest Only). 

Speak to our qualified mortgage advisers  

We can discuss your situation to help you plan your next steps with confidence. This includes seeing if you’re eligible for an Interest Only mortgage with us, taking you through our criteria, and looking at the best options for you from our mortgage range.  

Please note we don’t give whole of market advice on mortgages.

Frequently Asked Questions 

Repayment mortgage  

Your monthly payments go towards paying back both your mortgage loan and the interest each month, until your agreed mortgage term ends. As long as you keep on top of your repayments, your mortgage loan balance will reduce over time. And at the end of your mortgage term, you won’t owe anything.   

Part and part mortgage    

This is a mix of both repayment and Interest Only.  

For example, if you had a loan of £50,000, you could put £30,000 on repayment and £20,000 on Interest Only. So, you’d have £20,000 left to repay at the end of your mortgage term.  

Use our calculator to gauge the difference in monthly costs between an Interest Only mortgage, a repayment mortgage – or both (part and part).  

As well as Interest Only mortgages, we offer a range of repayment and part and part options. Try our Mortgage Product Finder to see if there’s a product for you.  

Currently, we don’t offer Interest Only mortgages for first-time buyers. Use our Mortgage Product Finder to see what other options we have available.  

When it comes to repaying your mortgage loan amount, you’ll need to have a solid repayment plan in place.  

At Skipton, we typically accept the below:  

  • Money from the sale of the property.   
  • Cash savings.  
  • Investments, such as shares and bonds.  
  • Pensions – 25% of your pension pot can be used as a repayment method.  
  • Other properties you have – such as Buy to Let, a holiday home, or a second property (in your name only).  
  • Other assets.  

The above are subject to our criteria and processes.  

Unsure whether your repayment plan is suitable? Find out if you meet our criteria with our mortgage team on 0345 607 9825. 

You can also visit the MoneyHelper website for more information on repaying an Interest Only mortgage. This includes help with mortgage arrears and how to manage debt.

When it ends, you’ll need to pay off your loan, in full, with one lump sum payment. How you repay this lump sum will be discussed when you apply for your mortgage – you’ll need to have a suitable repayment plan in place at the start of the mortgage and during the term. 

For more information on repaying an Interest Only mortgage – including help with mortgage arrears and how to manage debt – visit the MoneyHelper website.

You don’t have to wait until your mortgage term ends to pay off your loan. It’s generally better to repay your Interest Only mortgage (or at least part of it) well before the term ends. 

With our tracker products, you can make unlimited overpayments – without having to pay a charge. Although for most of our other mortgage products, you’ll have to pay an Early Repayment Charge if you overpay by more than 10%. You can find more information about the Early Repayment Charges for each product on our Mortgage Product Finder.

For more information on repaying an Interest Only mortgage – including help with mortgage arrears and how to manage debt – visit the MoneyHelper website.

You may be able to do this if you meet the criteria, which includes having a suitable repayment plan in place. 

The lending criteria for an Interest Only mortgage is much stricter than other mortgage types. To find out if you meet our criteria, chat to our friendly team on 0345 850 1766.  

An Interest Only mortgage is a riskier option than a repayment mortgage. It’s your responsibility to make sure you have enough money to repay the loan at the end of the term. You should regularly review your repayment strategy to make sure it’s on track. 

For advice on existing, or new, investment plans to repay your mortgage, it’s recommended that you speak to a financial adviser. 

Full details are available from Skipton, and when you apply for any of the above options.